Mexico and Y2K

Calef BrownMEXICO CITY -- WEARING A T-SHIRT INSCRIBED "Who's Afraid of Y2K?" in blazing red letters, Juan José Sanchez, a 27-year-old kitchen worker, settled back in his airplane seat for the flight home from New York City to his native Puebla state. "So you're not afraid of Y2K?" -- the January 1 date when computer failure threatens the world with chaos and cataclysm -- a bemused seatmate inquired. "Y2K?" Mr. Sanchez responded, pointing to his shirt. "What is it?"

The Puebla native's indifference to the wildly hyped "millennium bug" is the rule among the unplugged masses here. The news of techno-catastrophe has not exactly penetrated to the grassroots in this nation of 100 million people but only 5 million computers, mainframes, systems and PCs. But that hardly means Mexico is immune to the Y2K phenomenon. Top-tier Mexico is so eminently plugged into the global cybermachine that a loose screw like Y2K (in which computers purportedly will read the two digits "00" in the year 2000 as 1900) could shipwreck the economy and trigger environmental and human disaster -- on both sides of the U.S. border.

Mexico's susceptibility to global problems was graphically demonstrated in 1998, when steep fluctuations in money markets from Jakarta to Moscow to São Paulo sank the Mexican stock market like an intercontinental ballistic missile. With 80 percent of its commerce tied up in the U.S., Y2K havoc on one side of the North American Free Trade Agreement (NAFTA) line will cause disruption on the other. Just how tightly woven cross-border production has become was illuminated by a 1996 strike at an Ohio brake plant that shut down General Motors' units in Mexico and Canada.

The Mexican business class went through a dress rehearsal for Y2K disaster one and a half years ago, when a private satellite system flew out of orbit. It wasn't a pretty picture: Cellular-phone and beeper communications were KO'd, television was blacked out, hundreds of banks were shut down, and data flows between Mexico and the southeastern U.S. were out for six-hour stretches.ã

Scant hours, millennially speaking, from the Y2K crisis, Mexico now claims it is prepared to take on the Demon. "We are ready for any contingency," says Carlos Jarque, who headed up the National Commission on the Year 2000 Conversion (he is now secretary of social development). Mexico's Y2K preparation program makes it "a model child" in Latin America, The Wall Street Journal recently opined with patronizing flair.

But in the smoke-and-mirrors culture of Mexico, the gulf between the drawing board and reality can be vast. After air travel was pronounced 100 percent Y2K bug-free this August by Transportation Secretary Carlos Sacristan, one carrier -- Taesa -- conceded to reporters that its preparations were only 80 percent complete. One of Taesa's planes crashed this November, killing 18 passengers and crew, and Taesa has since been grounded.

The percentages of compliance used to measure Y2K readiness can be misleading, says Dr. Erasmo Marin, a member of the National Commission on Y2K Compliance: "It doesn't mean anything to say that an industry or an agency is in 99 percent or 80 percent compliance," Marin says. "This is only a quantitative measure of the fix -- the most difficult problems are often left for last."

Unlike in the deregulated, supercompetitive U.S., where huge corporate outlays have gone to the Y2K fix, Mexico has primarily its statist shell to worry about -- two electric utilities, one telephone company, the state-controlled petroleum consortium and 16 banks. But red lights are already flashing at Pemex, the nationalized oil corporation, where 12 percent of 18,000 components, ranging from giant drills to PCs, were shown to have possible glitches. A Deutsche Bank report issued in September expressed skepticism about Pemex's readiness to take on Y2K, describing the corporation as less than forthcoming about its compliance program.

Pemex is particularly susceptible to Y2K problems, because the bug often shows up in valve- and gate-control systems. A slip-up could trigger environmental carnage -- and collateral damage to the economy. (Pemex accounts for nearly 40 percent of the Mexican budget.)

The electric grid is another sector on Y2K alert. Although the not-very-talkative Federal Commission of Electricity (CFE) concludes that all its computerized components are 100 percent hunky-dory, Veracruz residents worry about the safety of the nation's only nuclear power plant, Laguna Verde. The plant's two reactors (1,300 megawatts) produce only 7 percent of the system's energy but a large share of its problems. Many of the plant mishaps reported over the past decade resulted from ill-fitting pipes and valves installed by hundreds of contractors during 25 years of plant construction. With Y2K at hand, one former Laguna Verde employee, who requested anonymity, worries that implanted chips in reactor control units won't be able to read the fatal 00 digits. While the CFE insists the problem is under control, the former worker is not so sure that anyone even knows where the chips are.

Mexico's financial institutions also may be in for some rocky moments. If the financial data flow is interrupted, as it was during the 1998 satellite blackout, the banks would shut down, and the government would be unable to meet international obligations.

The very plugged-in Mexican Bolsa de Valores (stock exchange) is also vulnerable to a Y2K hit. Even if all its systems are go, the exchange's partners could bring it down. Some Y2K pundits divine that Russia will crumble into dust under the weight of the millennium bug (literally, if a suspect early-warning nuclear-missile system is not disconnected before January 1). Similar problems in Brazil, where Y2K preparedness is lagging, could dampen confidence in Latin American exchanges and shut down investment -- although in a July-dated Y2K report, Merrill Lynch, the Wall Street brokerage, counseled "courageous" speculators that they could clean up in such a panic-driven atmosphere.

Mexico's ports could also be paralyzed. Although Hong Kong was supposedly in compliance since September 1, 1998, computer troubles similar to the Y2K phenomenon shut down the far more sophisticated port for four days last January 1. Other sectors at Y2K risk include the tourist industry, because of the bad rap on Y2K aviation. Not helping is the U.S. State Department, which has issued travel advisories warning of severe Mexican Y2K disruptions. While such disruptions may only translate to foiled reservations, stateside stay-at-home campaigns are not big tourist boosters.

On the other side of the coin, the Y2K hysteria has presented a bonanza for Mexico's cyber world. Mexican subsidiaries of U.S. and Japanese transnationals (Microsoft, Hewlett-Packard, Compaq) are offering easy-credit Y2K protection systems. By contrast to muted U.S. marketing, the south-of-the-border sales pitch for the millennial fix borders on the macabre. "Don't wait until it's too late!" advertises Data General over a morgue photo depicting the tagged big toe of a cadaver.

Of course, most Mexicans may barely notice Y2K problems, at least at first. Lights and phones go out -- no problem, the impoverished millions don't have 'em anyway. In the remote sierras, desolate deserts and deep outback of Mexico, Y2K is not going to amount to a hill of beans, with one exception. Down in the Lacandon jungle, the rebel chieftain known as Subcomandante Marcos just might have a problem when the laptop he uses to tap out his colorful communiqués suddenly goes kaplooey.


With or without Y2K, John Ross is about to go kaplooey.

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